Bile v. RREMC, LLC Denny's Restaurant et al
Filing
85
MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 8/24/2016. (jsmi, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
AMANGOUA J. BILE,
Plaintiff,
v.
Civil Action No. 3:15cv051
RREMC, LLC, and
DENNY'S CORPORATION,
Defendants.
MEMORANDUM OPINION
This matter is before the Court on a set of cross-motions:
Defendants'
MOTION
FOR
SETTLEMENT
ENFORCEMENT
(Docket
and Plaintiff's MOTION TO ENFORCE SETTLEMENT AGREEMENT
No.
54) .
For the
SETTLEMENT
reasons
ENFORCEMENT
stated below,
(Docket
No.
Defendants'
51)
will
be
Plaintiff's MOTION TO ENFORCE SETTLEMENT AGREEMENT
No.
51)
(Docket
MOTION
FOR
granted
and
(Docket No.
54) will be denied.
PROCEDURAL HISTORY
The
current
dispute
arises
out
of
an
employment
discrimination action filed by Amangoua J. Bile ("Bile") against
RREMC,
LLC and Denny's Corporation
(collectively,
"Defendants").
(Compl., ECF No. 1). The case was referred to a Magistrate Judge
for settlement discussions.
Conference,
(ECF Nos. 23, 24). At the Settlement
Bile was represented by Uduak Ubom
Ubom Law Group,
("Ubom")
of the
and Defendants were represented by Olaolowaposi
Oshinowo
P.C.
( "Oshinowo")
and Vij ay Mago
("LeClairRyan").
Settlement Agreement
On
July
21,
(Def.'s Ex. 1)
("Mago")
2015,
the
of
LeClairRyan,
parties
signed
a
("the Settlement Agreement")
which stated in relevant part that:
[w] ithin fifteen (15) business days of the
Effective Date, RREMC shall pay and Bile
shall receive a one-time lump-sum of SIXTY
FIVE
THOUSAND
DOLLARS
AND
00/100
( $ 65, 000. 00) ("Consideration") , made payable
to Bile. This Consideration shall be paid as
follows: ( 1) TWO THOUSAND DOLLARS AND 00/100
($2,000.00) reflected on a W2 as wages; (2)
SIXTY-THREE
THOUSAND
DOLLARS
00/100
($63,000.00)
reflected
on
a
1099
as
compensatory
damages.
This
Consideration
shall
reflect
compensatory
damages
for
Bile's claims and shall not be subject to
withholdings by RREMC.
Bile shall file with the United States
District Court for the Eastern District of
Virginia a Stipulation of Dismissal, with
prejudice,
except
that
the
Court
shall
retain jurisdiction to enforce the terms of
this Agreement.
Pursuant to Kokkonen v.
Guardian Life Insurance Co. of America, 511
U.S.
375
(1994),
the
Stipulation
of
Dismissal
shall
explicitly
reserve
such
jurisdiction in this Court. The Stipulation
of Dismissal is to be filed within ten (10)
business days of the execution of this
Agreement.
(Settlement Agreement at 1-2; Def.'s Post-Hrg. Mem. 4-5).
As
fact,
discussed
the
litigation,
email
in
used
more
by
detail
Bile's
in
the
counsel
"ubomlawgroup@yahoo.com,"
was
Court's
during
findings
the
course
of
of
compromised.
Def.'s Post-Hrg. Mem. 2, 7-8, 18; Pl.'s Post-Hrg. Resp. 7-9). On
2
July 29, 2015 at 6:40 p.m., the third party that compromised the
account sent an email from ubomlawgroup@yahoo.com to Oshinowo at
LeClairRyan,
instructing
that
the
payment
required
by
the
Settlement Agreement be wired to a Barclay's account, purporting
to be Bile's,
18;
Pl.' s
(~,
in London.
Post-Hrg.
LeClairRyan' s
internal
Def.'s
Resp.
Post-Hrg.
for
a
wire
2,
7-8,
initiated
Oshinowo
7-9) .
procedures
Mero.
transfer
in
the
amount of $63,000.00 to be dispatched to the Barclay's account,
and LeClairRyan initiated that transfer.
9).
Meanwhile,
Defendant
$2,000.00-less-witholding
address.
(Def.'s
RREMC,
and
LLC
mailed
Post-Hrg.
Mem.
(Def.' s
Post-Hrg.
processed
it
to
10) .
a
Bile's
Mem.
check
for
residential
received
Bile
$2, 000. 00-less-wi tholding check without incident.
(Def.' s
the
Post-
Hrg. Mem. 10).
On
July
31,
2 015,
Bile's
counsel,
Ubom,
inquiring about the remaining $63,000.00.
called
(Def.'s Post-Hrg. Mem.
6). At that point, Oshinowo learned that the July 29,
p.m.
email
Oshinowo
2015 6:40
from ubomlawgroup@yahoo.com had not originated with
Ubom,
and LeClairRyan unsuccessfully attempted to claw back the
wire
transfer.
Defendants
Bile
refused
refused
to
to
initiate
dismiss
another
this
action,
$63,000.00
and
payment.
(Def.'s Post-Hrg. Mem. 12, 25; Pl.'s Post-Hrg. Resp. 13-14).
When
the
Magistrate
Judge
learned
ordered the parties to brief the matter
3
of
the
situation,
(ECF Nos. 27-30,
he
32-39)
and initiated a criminal investigation with the United States'
Attorney's Office for the Eastern District of Virginia.
40).
In the course of this briefing,
first
time
email,
that:
(1)
purportedly
on
July
from
settlement
funds
in
LeClairRyan
27,
Bile,
the
subsequently
Defendants learned for the
2015,
Ubom had
directing
same
(ECF No.
the
Barclay's
transferred
the
received an
deposit
account
of
to
$63,000.00;
the
which
(2)
Ubom
had called Bile to determine whether the email was not genuine,
and Bile had confirmed that the email was not genuine;
Ubom
had
deleted
the
email
without
opposing counsel, or the Court.
informing
and
(3)
Defendants,
(Def.'s Post-Hrg. Mem. 20; Pl.'s
Post-Hrg. Resp. 2).
The parties were unable to resolve the matter. The dispute
was
then
presented
to
enforce
the
motions
to
the
hearing.
{ECF Nos. 46, 67,
Court,
which
settlement
69).
set
a
and
for
schedule
an
for
evidentiary
The parties filed cross-motions
to enforce the Settlement Agreement and presented evidence.
(ECF
Nos. 51, 54).
The
briefing
reasonableness
of
in
this
each
case
side's
originally
actions.
centered
Following
on
inquiry
the
from
the Court respecting the issues to be heard at the evidentiary
hearing,
the
parties
presented
additional
arguments
rooted
in
substantial performance, material breach, and certain aspects of
the
Uniform
Commercial
Code
("U.C.C.").
4
At
the
evidentiary
hearing,
Bile also unexpectedly presented an argument that the
Settlement Agreement did not correctly reflect the intent of the
parties. Post-trial briefing followed.
At
the
evidentiary
hearing,
Defendants
presented
the
testimony of David Melczer ("Melczer"), accepted by the Court as
an
expert
in
carried out
information
the
wire
Defendants'
the
transfer
position
transmitting
technology,
that
and
in question,
(Def.'s
in
Lemmert,
Post-Hrg.
support
who
of
the
reasonably
acted
Oshinowo
$63,000.00.
James
in
Mem.
7;
Pl.'s
Post-Hrg. Mern. 10-11). Bile presented his own testimony and that
of
Oshinowo
Settlement
in
support
Agreement
of
was
the
not
Bile's
position
enforceable
as
that:
( 1)
the
written;
and
(2)
Oshinowo acted unreasonably in transmitting the $63,000.00.
FINDINGS OF FACT
In
light
of
the
evidence
and testimony presented at
evidentiary hearings of June 16 and 22,
2016,
the
the Court finds
the following facts by a preponderance of the evidence. 1
A.
The Parties Signed A Valid Settlement Agreement
On July 21,
2015,
the parties signed a valid and binding
Settlement Agreement which provided that Bile was to dismiss the
action within ten days of execution and that Defendants were to
1
The burden required
Conclusions of Law.
is
discussed
5
in
greater
detail
in
the
pay Bile within fifteen days of execution.
(Def.' s Ex. 1; Def.' s
Post-Hrg. Mem. 4-5).
Bile's
assertion
alternate terms,
that
namely,
the
parties
is
stated,
barred
by
the
to
parol
(Pl.' s
evidence
rule.
Post-Hrg.
As
discussion of
the purported alternate
terms
the
signing
Agreement.
the
Settlement
Mero.
Bile
during direct examination by his own counsel,
parties'
introduce
that Bile intended that Defendants pay
him before he would dismiss the case
5), 2
intended
2,
himself
the only
occurred prior
(~,
to
Pl.'s
Post-Hrg. Resp. 5-7). Under the parol evidence rule, evidence of
inconsistent prior oral
agreements
is
inadmissible to vary or
augment the terms of an agreement where,
in
question
is
a
written,
integrated
as here,
agreement. 3
the contract
Restatement
2
Defendants deny that any such agreement to vary the terms of
the Settlement Agreement took place. (Def.' s Post-Hrg. Mem. 56). It is unnecessary to evaluate credibility, because evidence
of prior inconsistent terms is barred under the parol evidence
rule.
Defendants also presented uncontroverted testimony to the
effect that the order of performance was a material term that
was specifically bargained for.
(Def.'s Post-Hrg. Mem. 5-6).
Such evidence related to an argument made in pre-hearing
briefings that Bile materially breached the Settlement Agreement
by seeking to return to work for Defendants and threatening to
"appeal" in the time between execution on July 21, 2015 and
LeClairRyan's initiation of the wire transfer on July 29, 2015.
(E.g., Def.'s Post-Hrg. Mem. 5-8, 15-16, 25). The Court finds it
unnecessary to consider that argument to reach a decision in
this case, and will not dwell further on that testimony or
issue.
3
§
The Court finds, pursuant to Restatement (Second) of Contracts
213 (b) that the Settlement Agreement is such an integrated
6
(Second)
of
(Def.'s
Contracts
Ex.
§
1
("This
at
5)
213
("Restatement") ; 4 see
(1981)
Agreement
understanding between the parties.
constitutes
the
also
entire
The Parties have not relied
on any oral statements that are not included in this Agreement.
Any modifications ... must be in writing and signed by Bile and
an
authorized
employee
or
agent
of
[Defendants].").
Bile's
argument that such statements should be admitted as evidence of
the
"course
of
the
dealings
of
the
parties"
are
unavailing
because extrinsic evidence of prior or contemporaneous dealings
are admissible only to clarify ambiguous terms in an integrated
agreement,
not
agreement.
~,
Co.,
251 Va.
to
contradict
Doswell Ltd.
215,
222,
clear
P' ship v.
468 S.E.2d 84,
Co. v. Coutinho, Caro & Co.,
terms
in
an
integrated
Virginia Elec.
88
(1996);
617 F.2d 355, 357
&
Power
Brunswick Box
(4th Cir. 1980).
The timing provisions in the Settlement Agreement are perfectly
clear
and
neither
require
necessary
no
nor
clarification.
admissible
to
Hence,
parol
clarify
the
evidence
is
Settlement
Agreement. 5
contract, examining the plain language of the "Entire Agreement"
clause. (Def.'s Ex. 1 at 5).
4
Use of the Restatement as governing law is discussed in greater
detail below.
5
Neither party presented evidence of an agreement, or even
discussion, made subsequent to the Settlement Agreement which
would have altered the terms of the Settlement Agreement.
7
Finally,
Bile's assertion that the Settlement Agreement is
not valid is irreparably undermined by his own motion to enforce
that
same agreement.
the
Settlement
(Docket No.
Agreement,
Bile
51) .
Having moved to enforce
cannot
Agreement as written is unenforceable.
6
now
assert
Quite frankly,
that
the
the Court
cannot perceive how, having made the motion to enforce, Bile and
his counsel can also argue in any good faith that the Settlement
Agreement is unenforceable.
B.
Ubom Received a Fraudulent Email
On
July
27,
2016,
ubomlawgroup@yahoo.com,
Ubom's
received
an
email
business
email
from
an
account,
aoi.com
account, which was visually similar to Bile's legitimate aol.com
address.
(Def.' s
Post-Hrg.
Mem.
20,
22;
Pl.' s
Post-Hrg.
Resp.
2) . 7 That email requested that the $65,000.00 settlement be wired
(Def.'s
Post-Hrg.
Mem.
26).
As discussed at
footnote
Defendants' early payment was not a subsequent alteration.
8,
6
Al though Bile's conduct does not quite rise to the level of
judicial estoppel because Bile did not state an inconsistent
theory in prior litigation, e.g., Lowery v. Stovall, 92 F. 3d
219, 224 (4th Cir. 1996), Bile's filing of the motion to enforce
the Settlement Agreement on April 11, 2016 (Docket No. 51)
greatly undermines his present claim (Pl.'s Post-Hrg. Mem. 2, 57) that the parties did not intend the Settlement Agreement as
written to be binding. Bile's motion quite clearly reflects that
Bile intended the Settlement Agreement to be enforceable as
written.
7
As discussed in greater depth at the conclusion of the findings
of fact, the aoi. com email originated with a malicious third
party.
8
to
a
particular
Barclay's
account
in
Bile's
name
in
London.
(Def.'s Post-Hrg. Mem. 20; Pl.'s Post-Hrg. Resp. 2). Ubom called
Bile to ask if Bile had sent that email; Bile informed Ubom that
he had not.
(Pl.' s
Post-Hrg.
Resp.
2) .
Ubom deleted the email
without notifying Defendants, Defendants' counsel, or the Court.
(Def.'s Post-Hrg. Mem. 1-2, 10, 22; Pl.'s Post-Hrg. Resp. 2).
Bile's briefing states that neither Bile nor his attorneys
had
any
reason
compromised or
(Pl.' s
and
"to believe
that
Post-Hrg.
there
Resp.
dispositively,
1,
the
was
Settlement Agreement
potential
20) .
That
undermined
briefing that "[o] n July 27,
by
fraudulent
assertion
the
is
had been
activity."
irreparably,
statement
in
Bile's
2015 Plaintiff's counsel received
what he considered a fraudulent email"
(Pl.'s Post-Hrg. Mem. 20)
and the repeated statements in Bile's briefing that Ubom deleted
the
July
27,
2015
regarding fraud.
aoi. com email
(Pl.' s
because
Post-Hrg.
Mem.
of
2-3,
various
bulletins
20) . Moreover,
the
undisputed record shows that Ubom told Bile about the fraudulent
email.
The
Court
finds
that
knowledge that,
on July 27,
targeting
settlement
this
both
2015,
for
a
Ubom
and
Bile
had
actual
a malicious third party was
fraudulent
transfer
to
an
offshore account that did not belong to Bile. The Court further
finds that both Ubom and Bile knew the email account of the Ubom
Law Group was implicated in that fraudulent activity.
9
C.
Bile Pushes for, and Defendants Send, Early Payment
After
signing the
Settlement Agreement
on July
21,
2015,
Bile began hounding Defendants for an accelerated payment,
even
threatening to withdraw from the Settlement Agreement if he did
not receive payment by July 31,
16,
work
25;
Pl.' s
for
Post-Hrg.
Defendants
Resp.
(which
Settlement Agreement),
2015.
6).
was
(Def.' s Post-Hrg Mem.
15-
Bile attempted to return to
explicitly
forbidden
by
the
expressed that he was dissatisfied with
the amount of the consideration, and expressed that he wanted to
"appeal" the Settlement Agreement.
(Def.'s Post-Hrg. Mem. 6, 15;
Pl.'s Post-Hrg. Resp. 1, 7, 16, 26).
Defendants
that
the
payment
capitulated
payment
on
July
date
29,
be
2015,
in
the
face
advanced,
of
and
understanding
Bile's
agreed
that
insistence
to
Bile
initiate
wanted
the
consideration paid as quickly as possible and might attempt to
rescind the agreement if he did not
July
31,
2015. 8
(Def.' s
Post-Hrg.
8
receive the $63, 000. 00 by
Mem.
5-8,
15-16,
25;
Pl.' s
Contrary to Plaintiff's argument (Pl.'s Post-Hrg. Mem. 6-7, 10,
15, 17, 27), this capitulation did not represent an amendment to
the Settlement Agreement which would render the Settlement
Agreement in evidence invalid. The Settlement Agreement required
Defendants to pay within 15 days of July 21, 2015 (Def.'s Ex. 1
at 1-2). Thus, an early payment was clearly permitted by the
Settlement Agreement. (Def.'s Post-Hrg. Mem. 5). Definitively,
Bile concedes that "[p]aying the funds on July 31, 2015 was not
outside the terms of the Agreement, because the Defendant had a
duty to pay between July 21 and August 11, 2015 within the terms
of the Agreement." (Pl.' s Post-Hrg. Resp. 16). Thus, making an
early payment did not amend the contract.
10
Post-Hrg.
Resp.
1-2,
4,
6,
9).
Defendants acted as they did to
ensure that the Settlement Agreement was effectuated.
On July 29,
the
phone,
$63,000.00
and
sent
2015,
Ubom and Oshinowo discussed payment over
agreed
by
orally
that
LeClairRyan
two
and
one
checks
one
for
for
$2,000.00-less-
withholding sent by RREMC, LLC - would be sent by FedEx to Bile
at his residence in Virginia.
Post-Hrg.
Resp.
1-2).
(Def.'s Post-Hrg. Mem.
Oshinowo
expressed
that
7-8;
it
Pl.'s
might
be
difficult to process the $63,000.00 check to Bile as quickly as
Ubom and Bile desired.
Hrg. Mem. 9).
(Def.' s
Post-Hrg.
Mem.
7-8;
Pl.' s
Post-
Ubom and Oshinowo agreed, orally, that Ubom would
send confirmation of Bile's residential address to Oshinowo by
e-mail.
(Def.'s
Post-Hrg.
Mero.
ubomlawgroup@yahoo.com email,
address
to
Oshinowo
by
did
email
at
in
4: 33
using
the
confirm Bile's
home
Ubom,
7-8) .
fact
p.m.
on
July
29,
2015.
(Def.'s Post-Hrg. Mern. 6-8).
Subsequently,
received
that
the
account.
another
at
6:40
email
consideration
from
be
p.rn.
on
July
29,
2015,
ubornlawgroup@yahoo. corn,
wired
(Def.'s Post-Hrg. Mern. 2,
to
a
particular
Oshinowo
requesting
Barclay's
7-8). 9 Oshinowo believed that
this email and a follow-up email that arrived shortly thereafter
9
This Barclay's account was identical to the one identified in
the
fraudulent
July
27,
2015
aoi.corn
account
sent
to
ubornlawgroup@yahoo.com.
11
were
sent
(addressing
by
Ubom
Oshinowo
because
by a
of:
(1)
shortened
the
form of
"Posi," and Mago by Mago's given name)
of address used in Ubom' s
the
email
(3)
the
was
consistent
email
payment; 11
(4)
reiterated
Ubom' s
Bile
and
family
name,
was typical of the form
previous emails;
with
his
salutation
( 2)
the content of
error-prone typography; 10
Ubom's
demand
for
urgent
instructions by email were consistent with Ubom's
prior
statement
email;
and
(5)
atypical
by
phone
that
he
would
confirm
details
via
the attorneys in the case had communicated both
by phone and email throughout the case.
(Def.' s
Post-Hrg.
Mem.
8, 18; Pl.'s Post-Hrg. Resp. 7, 9) . 12 Melczer also testified that
the header information in the email demonstrated that the email
authentically came from Yahoo's servers,
meaning that:
(1)
the
10
In pre-hearing briefs, Bile argued that Oshinowo should have
been on notice that the email came from a malicious third party
because of the numerous typographical emails in the emails sent
the evening of July 29, 2015. The Court, having read Ubom' s
briefing and several emails genuinely sent by Ubom, concurs with
Defendants that the typographical errors are characteristic of
Ubom's practice, and made it more, rather than less, reasonable
for Oshinowo to believe that the emails sent by the malicious
third party actually originated with Ubom. (E.g., Def.' s PostHrg. Mem. 8) .
11
As Lemmert testified,
a wire transfer was faster than
processing a check for $63,000.00. (Def.'s Post-Hrg. Mem. 9).
12
Bile "failed to present any evidence to impeach or rebut
Defendants' evidence regarding the authenticity of the e-mail
requesting a wire transfer, and the reasonableness of Mr.
Oshinowo' s assessment based on the surrounding circumstances."
(Def.'s Post-Hrg. Mem. 8-9).
12
email actually came from ubomlawgroup@yahoo.com and was sent by
someone with access
to the ubomlawgroup@yahoo.com account;
( 2)
nothing about the email's header information would have alerted
Oshinowo that the email was sent by from someone other than Ubom
or the Ubom Law Group; 13 and (3) industry-standard email security
filters
email.
The
would
not
have
alerted
Oshinowo
Court
finds
Melczer' s
of
this
18; Pl.'s Post-Hrg. Resp.
(Def.'s Post-Hrg. Mem. 7,
8) . 14
expert
to
opinions
be
to
wary
be
reliable
and
credible.
Oshinowo,
the
email
believing that the email came from Ubom and that
reflected
Ubom and
Bile's
desire
payment by the most expeditious method,
internal procedures
the
account
Post-Hrg.
rebut,
the
specified .
Resp.
that:
for
( 1)
instructions
10}.
sending a
( Def . ' s
Post - Hr g .
Lemmert testified,
the
ubomlawgroup@yahoo.com;
July
(2)
29,
the
2015
Bile
receive
initiated LeClairRyan's
$63,000.00
the wire transfer was
in
that
wire
Mero .
and
transfer to
9,
18 -19 ;
P1 . ' s
Plaintiff did not
initiated according to
6:40
recipient
p.m.
name
on
email
from
the
wire
13
The ubomlawgroup@yahoo.com account is shared by all employees
of the Ubom Law Group.
14
"(T]here is no factual dispute that Defendants had no ability
or reason to believe the requests set forth in the July 29, 2015
e-mail were anything other than legitimate
requests
from
opposing counsel - coming from precisely the same email address
that opposing counsel used to communicate with Defendant seven
prior to the conunencement of this action." (Def.' s Post-Hrg.
Mem. 2).
13
transfer
order
was
Amangoua
J.
industry standard practices,
the
recipient
name
on the
Bile;
the
and
(3)
per
banking
receiving bank confirmed that
wire transfer order corresponded to
the name of the holder of the recipient account.
(Def.' s
Hrg.
10) .
9,
Mem.
18-19;
authenticated,
evidence,
receipts
transfer
July
and
for
29,
Pl.' s
Defendants
showing
$63, 000. 00
2015
6:40
Post-Hrg. Mem.
9,
completed
wire
the
instructions
in
July
31,
Resp.
successfully
that
according
p.rn.
introduced
LeClairRyan
to
the
Lemmert
completed
instructions
ubornlawgroup@yahoo.com
email.
into
a
wire
in
the
(Def.'s
18-19). Bile does not dispute that LeClairRyan
transfer
the
July
ubomlawgroup@yahoo.com.
On
Post-Hrg.
Post-
for
according
2015
29,
$63, 000. 000
p.m.
6:40
to
email
the
from
(Pl.'s Post-Hrg. Resp. 1).
2015,
Bile
called
Ubom
to
complain
that,
although Bile had received by mail a check for $2, 000. 00-lesswitholding,
the
remaining
$63,000.00
had
not
been
delivered.
Ubom raised the matter with Oshinowo, who informed Ubom that the
money had been wired as
p.rn.
instructed by the July 29,
email from ubomlawgroup@yahoo.com.
anyone
in his
office
sent
the
July 29,
from ubomlawgroup@yahoo.com.
14
2015,
6: 40
Uborn denied that he or
2015,
6:40
p.m.
email
D.
Aftermath
Following
the
discussion
with
Ubom,
Oshinowo
and
LeClairRyan immediately attempted to recall the $63,000.00 wire
transfer, but were unsuccessful.
On July 31,
through
2015,
LeClairRyan
$63,000.00 payment;
payment.
(Pl.'s
Oshinowo informed Ubom that
or
otherwise,
would
not
make
another
Defendants have not made another $63,000.00
Post-Hearing
Resp.
1,
13-14).
Ubom
Oshinowo that Bile would not dismiss the action;
dismissed the action.
Hrg. Mero.
Defendants,
informed
Bile has not
(Def.' s Post-Hrg. Mero. 12, 25; Pl.' s Post-
2). The dispute came before the Magistrate Judge, who
ultimately ordered a criminal investigation by the United States
Attorney for the Eastern District of Virginia.
While
the
learned
dispute
for
received a
to
the
the
was
before
first
time
the Magistrate
that
on
July
(Docket No.
Judge,
27,
40) .
Defendants
2015
Bile
had
fraudulent aoi. com email requesting a wire transfer
same
Barclay's
address
to
which
LeClairRyan wired the
$63,000.00.
The Court understands,
the
same
malicious
party
and the parties seem to agree,
who
sent
the
July
27,
2015
that
aoi. com
email to ubomlawgroup@yahoo.com also sent the July 29, 2015 6:40
p.m.
email
from
ubomlawgroup@yahoo.com to Oshinowo.
further understands,
and the parties
seem to agree,
The
Court
that this
malicious third party controlled the Barclay's account to which
15
both
emails
$63, 000. 00,
withdrew
ref erred
and
to
which
LeClairRyan
wired
the
and that this malicious third party transferred or
the
$63,000.00
prior
to
LeClairRyan's
claw
back
attempt.
CONCLUSIONS OF LAW
Guided by general contract principles and by the persuasive
authority of Article 3 of the U.C.C.,
the Court concludes that
Defendants
substantially performed their obligations
Settlement
Agreement
on
July
29,
2015,
and
are
under the
entitled
to
specific performance of Bile's obligations under the Settlement
Agreement.
A.
Burden of Proof, Jurisdiction, and Choice of Law
It is well-settled that when the validity of a Settlement
Agreement is questioned,
of
the
540-41
the standard of proof is preponderance
evidence.
Hensley v.
(4th Cir.
2002).
Alcon Labs.,
This case,
Inc.,
however,
277
F.3d
includes
issue of
both validity and performance. The parties both propose
Post-Hrg.
concurs
Mem.
11;
Pl.'s
Post-Hrg.
that
the
default
is
the
appropriate
evidence,
Settlement
Agreement.
civil
(Def.'s
Resp.
burden,
12)
and
the
preponderance
standard
for
Post-Hrg.
Mem.
performance
11)
535,
(Def.'s
Court
of
the
of
(relying
a
on
Richardson v. Cabarrus Ct. Bd. of Educ., 151 F.3d 1030 (4th Cir.
16
Proctor & Paine,
1998); Stvens v. Abbot,
48
Supp.
836,
847-
(E.D. Va. 1968)).
This
the
288 F.
Court
has
Settlement
jurisdiction over
Agreement
because
disputes
the
arising out
of
continuing
Court's
jurisdiction was included in the Settlement Agreement from which
the dispute arose.
Kokkonen v.
511
( 1994) ;
U.S.
37 5,
382
Guardian Life
Columbus-Am.
Ins.
Co.
Discovery Grp.
of Am.,
v.
Atl.
Mut. Ins. Co., 203 F.3d 291, 299 (4th Cir. 2000).
The Settlement Agreement lacks a choice of law clause,
the
and
parties
law
dispute
whether
federal
common
law
or
state
governs an agreement settling a federal cause of action.
Post-Hrg.
perfectly
Mem.
10;
clear
as
Pl.' s
a
Post-Hrg.
matter
of
precedent, 15 but the Court need not
15
Mem.
12) .
Fourth
(Def.'s
This issue is not
Circuit
or
district
resolve the matter because
The trend tends to be that, where a Settlement Agreement
settles federal claims, it is governed by federal common law.
U.S. ex rel. Ubl v. IIF Data Sols., 650 F.3d 445, 451 (4th Cir.
2011)
("The enforceability of an agreement to settle claims
under the FCA is governed by federal common law" which is
informed by the Restatement (Second) of Contracts) (relying on
Pinchback v. Armistead Homes Corp., 907 F.2d 1447, 1453 (4th
Cir.1990)); Silicon Image, Inc. v. Genesis Microchip, Inc., 271
F. Supp. 2d 840, 848
(E.D. Va. 2003)
(relying largely on
Gamewell Mfg., Inc. v. HVAC Supply, Inc., 715 F.2d 112, 115 (4th
Cir. 1983)).
However, the Fourth Circuit has recently acknowledged that
the law on this matter is not absolutely clear. Swift v.
Frontier Airlines, Inc., No. 15-1261, 2016 WL 80580, at *3, n. *
(4th Cir. Jan. 7, 2016) (noting defendant's assertions of legal
ambiguity on the choice of law issue, but ignoring the issue
because
state
law
would
inform
federal
law
regardless) .
Additionally,
Gamewell's analysis may have been "eroded by
17
the
governing
principles
this
case
are
settled
contract
principles exposited in both federal common law and state law.
~'
Hilb Rogal
2006 WL 5908727,
an
&
Hobbs Co.
at *11
inquiry into choice
v.
Rick Strategy Partners,
(E.D. Va.
of
law is
Feb.
10,
2006)
Inc. ,
(finding that
only necessary if potential
sources of law lead to conflicting results) .
B.
Common Law Contract Principles, Supplemented with Uniform
Commercial Code Rules, Provide the Most Appropriate Approach for
Analyzing Entitlement to Enforce the Settlement Agreement
There is no case law precisely on point for analyzing this
case.
and
However,
a combination of common law contract principles
principles
from
conclusion
that
Settlement
Agreement,
Article
Defendants
and
3
of
the
substantially
thus
are
U.C.C.
performed
entitled
to
compel
the
under
the
substantial
performance from Bile under the Settlement Agreement.
1. Common Law Supplies Principles of Material Breach
and Substantial Performance
The Restatement
(Second)
of Contracts states that "it is a
condition of each party's remaining duties to render performance
that there be no uncured material failure by the other party
to
render
Restatement
any
§
such
performance
due
at
an
237; see also U.S. ex rel. Ubl v.
earlier
time."
IIF Data Sols.,
subsequent Supreme Court cases [to the extent that it] is
inconsistent with contemporary doctrine" on the role of federal
common law. Morton Denlow & Jonny Zajac, Settling the Confusion:
Applying
Federal
Common
Law
In
Settlement
Enforcement
Proceedings Arising Under Federal Claims, 107 Northwestern U. L.
Rev. 127, 146 & 146 n.147 (2012).
18
650 F.3d 445, 451
(4th Cir. 2011)
("When applying federal common
law to contract issues, courts generally look to the Restatement
for guidance."); Horton v. Horton, ,254 Va. 111, 115,
200,
203-04
breach);
767
(1997)
stated
(reciting common law principles of material
Culpeper Reg' 1 Hosp.
S.E.2d
in
236,
239
Horton
failure"
Restatement
§
L. P.,
Jones,
64 Va.
(connecting
Restatement
the
237).
§
App.
common
The
207,
213,
law
rule
converse
performance."
"substantial
is
241 cmt. d;
No.
v.
(2015)
with
"material
Mills,
487 S.E.2d
of
~'
see also S. Auburn L.P. v. Old Auburn
24210,
2005 WL 1995433,
at
*5
(Va.
Cir.
Ct.
Aug. 18, 2005); RW Power Partners v. Virginia Electric and Power
Co.,
899
F.Supp.
provision
of
exchange:
Bile's
$63,000.00
the
in
1490,
1496-97
Settlement
dismissal
damages
(E.D.
Va.
1995).
Agreement
of
and
the
is
action
The material
the
in
underlying
exchange
$2,000-less-witholding
for
from
Defendants, and vice versa. If one party materially breached the
Settlement
Agreement,
then
that
party
did
not
substantially
perform and is not entitled to compel reciprocal performance.
In determining whether a failure to render performance is
material, the following circumstances are significant:
(a) the extent to which the injured party
will be deprived of the benefit which he
reasonably expected;
(b) the extent to which the injured party
can be adequately compensated for the part
of
that
benefit
of
which
he
will
be
deprived;
19
(c) the extent to which the party failing to
perform or to offer to perform will suffer
forfeiture;
(d) the likelihood that the party failing to
perform or to off er to perform will cure his
failure,
taking
account
of
all
the
circumstances
including
any
reasonable
assurances;
(e) the extent to which the behavior of the
party failing to perform or to offer to
perform comports with standards of good
faith and fair dealing.
Restatement
241;
§
S.
Auburn
L.P.,
2005
WL
1995433,
at
*5
(applying Restatement§ 241); RW Power Partners, 899 F.Supp. at
1496-97
(same);
see also Restatement § 241 cmt.
f
{"A party's
adherence to standards of good faith and fair dealing
. . . will
not prevent his failure to perform a duty from amounting to a
breach
failure
....
Nor will his adherence
from
condition") .
There
having
the
effect
...
of
necessarily prevent his
the
non-occurrence
of
a
16
can be
no
question
embodied in the Restatement
that
the
common
law principles
(Second) of Contracts are applicable
to this proceeding: the dispute is one of contract performance,
and the relevant Restatement principles have been incorporated
into
both
However,
federal
these
common
common
law
law
and
contract
Virginia
state
principles
guidance on how to resolve the facts at hand.
16
common
law.
provide minimal
Therefore,
it is
"Good faith and fair dealing" is not the same concept as
"ordinary care." Compare Uniform Commercial Code § 3-103(6)
(defining good faith) with § 3-103(9) (defining ordinary care).
20
necessary to look further afield to related and persuasive areas
of law to aid the decisional process.
Article
provide
3
rules
assessing
the
of
the
and
U. C. C.
analogous
propriety
of
and
cases
situations
the
analyzing
which
that
are
title
useful
conduct.
parties'
on
Guidance
2.
The
U. C . C •
Approach
Provides
Reasonableness and Performance
Although
Article 3 by its terms governs only negotiable instruments,
contract disputes or wire transfers,
17
1991)
this
Tycon I Bldg. Ltd.
P'ship,
not
Article 3 is persuasive in
areas of law which it does not directly govern.
Bank v.
in
Old Stone
~,
946 F.2d 271,
273
(4th Cir.
("While the UCC does not of course govern the outcome of
suit
involving
real
property,
both
sides
agree
that
it
provides persuasive authority in these circumstances") . 18 In the
absence of contract law directly on point,
the Court finds that
Article 3 provides guidance for the resolution of this case.
U.C.C.
a
§
fraudster,
conversion
3-420 states that, where a check is intercepted by
the
because
intended
"if
[a]
payee
check
has
is
no
cause
never
of
action
delivered
to
for
the
17
Wire transfers are explicitly governed by Article 4 of the
U.C.C., not Article 3's rules for negotiable instruments. U.C.C.
§§ 3-102,
4A-104. Because the last communication legitimately
sent by Ubom requested a check, however, the Court looks to
Article 3 rather than Article 4 for persuasive rules.
18
The Court solicited the parties' views on whether Article 3
might be used as a persuasive authority, and both parties agreed
that Article 3 is persuasive. (E.g., Docket Nos. 69, 70, 71).
21
payee,
the
obligation owed to
the payee
is
not
affected
Since the payee's right to enforce the underlying obligation is
unaffected by the fraud of the thief, there is no reason to give
any additional remedy to the payee." U.C.C.
U.C.C.
comment
goes
on
to
note
deli very when the check comes
that
§
3-420 cmt. 1. The
"[t]he
payee
receives
into the payee's possession,
as
for example when it is put into the payee's mailbox." Id. 19 Taken
together,
these
instrument but
possession,
sections
fails
then
the
teach
that,
if
a
payor
issues
an
to deliver the instrument to the payee's
payor
is
still
liable
on
the
underlying
obligation.
However,
§§ §
3-404 and 3-406, addressing third party fraud
and depositing checks at a bank,
principle
that
a
party
whose
inject into this equation the
failure
to
take
ordinary
results in loss must be the party to bear that loss.
Per
care
§
3-
304,
(a) If an impostor ... induces the issuer of
an instrument to issue the instrument to the
impostor
by impersonating the payee of
the instrument or a person authorized to act
for
the
payee,
an
indorsement
of
the
instrument by any person in the name of the
payee is effective as the indorsement of the
payee in favor of a person who, in good
faith, pays the instrument or takes it for
value
or
for
collection
19
Additionally,
payee." Id.
" [ d] eli very
to
22
an
agent
is
deli very
to
the
(d) With respect to an instrument to which
subsection
(a)
applies,
if a person
paying the instrument or taking it for value
or for collection fails to exercise ordinary
care in paying or taking the instrument and
that failure substantially contributes to
loss
resulting
from
payment
of
the
instrument, the person bearing the loss may
recover from the person failing to exercise
ordinary care to the extent the failure to
exercise ordinary care contributed to the
loss.
u.c.c.
§
3-404
(emphasis
added) .
Comment
3
provides
following example:
Thief, who is not an employee or agent of
Corporation,
steals
check
forms
of
Corporation.
John
Doe
is
president
of
Corporation and is authorized to sign checks
on behalf of Corporation as drawer. Thief
draws a check in the name of Corporation as
drawer by forging the signature of Doe.
Thief makes the check payable to the order
of
Supplier
Co.
with
the
intention
of
stealing it.
Whether Supplier Co.
is a
fictitious person or a real person, Thief
becomes the holder of the check and the
person entitled to enforce it
Thief
deposits
the
check
in
an
account
in
Depositary Bank which Thief opened in the
name
"Supplier Co."
Depositary Bank
becomes the holder of the check and the
person entitled to enforce the check. If the
check is paid by the drawee bank, there is
no breach of warranty under Section 3417 (a) (1) or 4-208 (a) (1) because Depositary
Bank was a person entitled to enforce the
check when it was forwarded for payment and,
unless
Depositary
Bank
knew
about
the
forgery of Doe's signature,
there is no
breach of warranty under Section 3-417{a) (3)
or 4-208(a) (3).
Because the check was a
forged check the drawee bank is not entitled
to
charge
Corporation's
account
unless
Section 3-406 or Section 4-406 applies.
23
the
u.c.c.
§
3-404.
Taken together, these provisions establish a principle that
a
blameless
party
representations,
is
entitled
to
rely
on
reasonable
even when those reasonable representations are
made by fraudsters. Additionally,
§
3-406 establishes that
(a)
A person whose failure to exercise
ordinary care substantially contributes to
an alteration of an instrument or to the
making
of
a
forged
signature
on
an
instrument is precluded from asserting the
alteration or the forgery against a person
who, in good faith, pays the instrument or
takes it for value or for collection.
(b)
Under subsection (a},
if the person
asserting the preclusion fails to exercise
ordinary care
in paying or taking the
instrument and that failure substantially
contributes to loss, the loss is allocated
between the person precluded and the person
asserting the preclusion according to the
extent to which the failure of each to
exercise ordinary care contributed to the
loss.
(c)
Under subsection
(a), the burden of
proving failure to exercise ordinary care is
on the person asserting the preclusion.
Under subsection (b), the burden of proving
failure to exercise ordinary care is on the
person precluded.
U.C.C.
§
3-406. "Substantially contributes" "is meant to be less
stringent than a "direct and proximate cause" test. U.C.C.
§
3-
406 cmt. 2. "Under the less stringent test the preclusion should
be easier to establish. Conduct 'substantially contributes' to a
material alteration or forged signature if it is a contributing
24
cause of the alteration or signature and a substantial factor in
bringing it about." Id.
Notably,
"ordinary
ordinary
case."
Article
care,"
care
Those
3
and
based
does
instead
on
"the
circumstances
not
define
calls
for
a
circumstance
include
any
what
constitutes
determination
of
of
the
particular
applicable
commercial
standard.
No attempt is made to define particular
conduct that will constitute "failure to
exercise
ordinary
care
"
Rather,
"ordinary care" is defined in Section 3103 (a) (7) in general terms. The question is
left to the court ... for decision in light
of the circumstances in the particular case
including
reasonable commercial
standards
that may apply.
U. C . C .
§
3- 4 0 6 crnt .
1.
Se ct ion
general:
" ' [ o] rdinary care'
business
means
prevailing
in
observance
the
area
in
§
3-10 3 (a ) ( 7 ) is ,
indeed,
quite
in the case of a person engaged in
of
reasonable
which
the
commercial
person
is
standards,
located,
with
respect to the business in which the person is engaged." Article
3
does,
however,
provide
illustrative
examples
about
checks.
Case #1. Employer signs checks drawn on
Employer's account by use of a rubber stamp
of Employer's signature. Employer keeps the
rubber
stamp
along
with
Employer's
personalized
blank
check
forms
in
an
unlocked desk drawer. An unauthorized person
fraudulently uses the check forms to write
checks on Employer's account. The checks are
signed by use of the rubber stamp.
If
25
cashing
Employer demands that Employer's account in
the drawee bank be recredited because the
forged check was not properly payable, the
drawee bank may def end by asserting that
Employer is precluded from asserting the
forgery. The trier of fact could find that
Employer failed to exercise ordinary care to
safeguard the rubber stamp and the check
forms and that the failure substantially
contributed to the forgery of Employer's
signature by the unauthorized use of the
rubber stamp.
Case #2. An insurance company draws a check
to the order of Sarah Smith in payment of a
claim of a policyholder, Sarah Smith, who
lives in Alabama. The insurance company also
has a policyholder with the same name who
lives in Illinois. By mistake, the insurance
company mails the check to the Illinois
Sarah Smith who indorses the check and
obtains payment. Because the payee of the
check is
the Alabama Sarah Smith,
the
indorsement by the Illinois Sarah Smith is a
forged indorsement. Section 3-llO(a). The
trier of fact could find that the insurance
company failed to exercise ordinary care
when it mailed the check to the wrong person
and
that
the
failure
substantially
contributed to the making of the forged
indorsement. In that event the insurance
company could be precluded from asserting
the forged indorsement against the drawee
bank that honored the check.
U. C . C .
§
3- 4 0 6 cmt .
3.
In
sum,
the U. C . C .
requires
"o rdi nary
care" by participants in financial transactions; the participant
who fails to exercise ordinary care is liable for any losses to
which his lack of ordinary care substantially contributes.
Combining
Services,
several
of
these
concepts,
in Barrett
Business
Inc. v. Worker's Comp. Appeals Bd., 204 Cal. App.
26
4th
597
( 2012),
sent
the court held that where:
employer's
claims
change of address;
(2)
employee's address;
adjuster
a
( 1)
employee's attorney
notification
(3)
employer's claims adjuster sent worker's
old address;
party fraudulently cashed the worker's
and
("where the issuer ...
obligation.")
of U.C.C.
N.A.,
No.
§
remains
( 4)
a
third
compensation check,
employer was still obligated to pay its employee.
issuer
employee's
employer's claims adjuster did not update
compensation check to employee's
the
of
the
Id. at 600-603
does not deliver the check to the payee
liable
to
the
(relying on California's
payee
on
the
underlying
statutory implementation
3-420) . 20 By contrast, in Willis v. Wells Fargo Bank,
2:11CV193,
the court held that,
2012 WL 112942
(E.D.
Va.
Jan.
12,
2012),
where an agent of a business who was also
an authorized drawer on the business's account lied to the bank,
but
the bank adhered to Article
3 best practices and made no
error of its own,
the injured third party to whom a bad check
was
claim against
given
had
no
pertinent U. C. C.
provisions,
the
Barrett,
bank.
A synthesis
and Willis
of
yields a
the
rule
that: if a person has an obligation to deliver a check, and does
20
Contrary to Bile's assertion (Pl.'s Post-Hrg. Resp. 20),
Barrett does not stand for the proposition that a defendant is
liable on any check which is not delivered to its intended
recipient.
Rather,
Barrett
more
properly
stands
for
the
principle that a party which acts without ordinary care bears
the loss associated with the intervention of a malicious third
party. Barrett, 204 Cal. App. 4th at 603.
27
not deliver that check due to that person's own error, then that
person remains liable on the underlying obligation.
In this case,
Defendants'
application of this principle means that:
agent,
issued
LeClairRyan,
the
if
transfer
wire
pursuant to Defendants' agent's own error or Defendants' agent's
lack
of
ordinary
underlying
Bile's
care,
then
obligation.
agent,
Ubom,
Defendants
U.C.C.
§
the
caused
3-420
remain
cmt.
wire
1.
transfer
liable
on
the
Conversely,
to
be
if
issued
pursuant to Bile's agent's own error or Bile's agent's lack of
ordinary
care,
underlying
then
Bile
obligation.
is
Id.
not
entitled
Defendants
to
collect
the
liable
remain
on
on
the
underlying obligation if the transfer of funds can be described
as Defendants' agent's error rather than Bile's agent's error.
3 . Combining Common Law Con tract Principles with
Applicable
Precepts
of
Article
3
Yields
a
Functional Roadmap for Assessing Entitlement to
Enforce the Settlement Agreement
The utility of the
Article
3
approach
is
common
best
law contracts
aggregated
by
approach and the
nesting
Article
3
principles within Restatement § 237. This approach yields a twostep
rule:
duties
material
to
( 1)
"it
render
failure
is
a
condition
performance
by
the
that
other
party
performance due at an earlier time"
the
parties'
material
of
failure
(or
28
each
party's
there
to
be
render
remaining
no
uncured
any
such
(Restatement§ 237); and (2)
its
converse,
substantial
performance) shall be determined by examining whether they acted
in accord with principles of ordinary care as characterized in
U.C.C.
§
3-404 and
Accordingly,
3-406.
§
the
Court
proceeds
to
examine
whether
the
parties acted with principles of ordinary care as characterized
in U.C.C.
C.
§
3-404 and
3-406.
§
Bile's Agent, Ubom, Failed to Exercise Ordinary Care
Bile's agent,
circumstances.
Ubom,
That
failed to use ordinary care under the
failure
substantially
contributed
to
the
$63,000.00 loss in this case.
The
parties
have
cited no
decision
articulating
that
an
attorney has an obligation to notify opposing counsel when the
attorney
has
actual
knowledge
that
a
third
party
access to information that should be confidential,
terms of a settlement agreement,
that
the
funds
to
a
sensible one.
Indeed,
such as the
settlement agreement
have been the target of an attempted fraud.
However,
gained
or the attorney has knowledge
to be paid pursuant
located such authority.
has
Nor has the Court
the principle is an eminently
Bile's briefing clearly considers that to
be the case because Bile states, repeatedly, that attorneys have
"an obligation to contact
receive(]
suspicious
[opposing]
emails
counsel when and if they
instructing
[them]
to
wire
settlement funds to a foreign country where such [a] request has
never
been
made
during
the
course
29
of
performance
of
the
(~.,
parties."
this
argument
this
standard,
Pl.'s
Post-Hrg.
orally during
Resp.
the
3,
23).
evidentiary
Ubom
repeated
hearing.
Applying
Ubom failed to act with the ordinary care that
he, correctly, says should govern this case.
Two days before the fraud was perpetrated on LeClairRyan,
both Ubom and Bile were aware that an unidentified third party
had targeted the settlement funds
bank
account
that
had nothing
for di version to a Barclay's
to
do
with
Bile.
Additionally,
Bile and Ubom knew that ubomlawgroup@yahoo.com was being used in
an
effort
to
perpetrate
the
fraud.
information along to Defendants,
Ubom
failed
defense counsel,
to
pass
this
or the Court.
This failure substantially contributed to the loss of $63,000.00
within the meaning of U.C.C.
evident
that
if
Oshinowo
3-406.
§
or
Mago
The Court finds it selfwas
aware:
(1)
that
the
settlement funds were the target of a malicious third party;
(2)
that the terms of the confidential Settlement Agreement had been
accessed by a
malicious
third party;
or
third party was angling to redirect the
( 3)
that
a
malicious
settlement funds
Barclay's account when Bile had no such account,
to a
then Oshinowo
would not have initiated the wire transfer on July 29, 2015.
Because Ubom failed
himself
states
is
the
to
observe
and
because that failure substantially contributed to the loss,
the
principles
law
in
the
for
U.C.C.
30
the
and
practice
of
he
law,
developed
standard
the ordinary care that
associated
case
provide
that
Bile
must
bear
the
~,
malicious third party behavior.
420; Barrett, 204 Cal. App.
loss
associated
U.C.C.
§§
4th at 603; Willis,
with
the
3-404, 3-406, 32012 WL 112942,
at *1.
Bile attempts,
incorrectly, to defend his behavior by vague
references to law enforcement and industry advisories which were
not introduced to the record.
(Pl.' s Post-Hrg. Resp.
("the advisory from this Court,
Bar
advises
emails
that
without
one
the FBI, ABA and [] every State
should
opening
delete
them;
3, 11, 20)
as
any
such [,]
suspected
Counsel
fraudulent
deleted
that
fraudulent email when Plaintiff confirmed he did not send it.").
Because the advisories are not
in the
record,
Bile's argument
simply fails for lack of proof.
Moreover, it appears that such advisories simply do not say
what Bile claims they say. In 2011, the American Bar Association
republished
regarding
an
an
advisory
from
increasingly
the
California
common
scam
by
Bar
Association
which:
( 1}
a
prospective client, typically foreign, would solicit an attorney
for
legal
prospective
representation
client
would
against
inform
another
the
attorney
party;
that
( 2)
the
the
other
party had capitulated and would mail the attorney a settlement
check,
and
request
attorney's fees)
check
and
wire
that
the
attorney
to the client;
the
funds
to
( 3)
the
31
wire
the
funds
(less
the attorney would cash the
client;
( 4)
the
bank
would
determine that the check was
would be
liable
for
counterfeit;
the wired
funds.
and
(5)
Internet
the attorney
Scams
State Bar of California Ethics Hotline
Attorneys,
Targeting
{Jan.
2011),
http://www.americanbar.org/content/dam/aba/administrative/profes
sional_responsibility/6_combined_session_documents.authcheckdam.
pdf.
This
advisory
did
conclude
that
"[h]itting
the
delete
button may be the best course of action for the attorney" upon
solicitation from suspicious and unknown clients.
Id.
at 6.
The
FBI released an advisory regarding a similar scam. New Twist on
Counterfeit
Bureau
of
Check
Schemes
Targeting
Investigations
U.S.
Law
Firms,
Federal
27,
2016)
Jul.
(accessed
https://www2.fbi.gov/cyberinvest/escams.htm. 21
Eastern
The
District of Virginia has not issued a warning about email scams
targeting attorneys in the past three years. Scam Alerts, United
States
District
Court
for
the
21
Eastern
District
of
Virginia
The type of scam referenced in the State Bar of California and
FBI advisories has also led to litigation between attorneys and
their banks. ~, Fischer & Mandell, LLP v. Citibank, N.A., 632
F.3d 793, 795 (2d Cir. 2011); Simmons, Morris & Carroll, LLC v.
Capital One, N.A., 49,005 (La. App. 2 Cir. Jun. 27, 2014);
Mechanics Bank v. Methven, No. A136403, 2014 WL 4479741 (Cal.
Ct. App. Sept. 12, 2014); Greenberg, Trager & Herbst, LLP v.
HSBC Bank USA, 17 N. Y. 3d 565, 571, 958 N. E. 2d 77, 79 (2011);
Bank One, NA v. Dunn, 40,718, 927 So. 2d 645 (La. App. 2 Cir.
Apr. 12, 2006); O'Brien & Wolf, LLP v. Associated Banc-Corp, No.
11-CV-1253 SER, 2013 WL 1104641 (D. Minn. Mar. 18, 2013); Branch
Banking & Trust Co. v. Witmeyer, No. 3:10CV55-HEH-DWD, 2011 WL
3297682, at *1 (E.D. Va. Jan. 6, 2011); PNC Bank, NA v. Martin,
No. CIV.A 08-649-JBC, 2010 WL 3271725 (W.D. Ky. Aug. 19, 2010);
JP Morgan Chase Bank, N.A. v. Cohen, 26 Misc. 3d 1215(A), 907
N.Y.S.2d 101 (Sup. Ct. 2009).
32
(accessed
Jul.
2016)'
27'
http://www.vaed.uscourts.gov/notices/SCAM%20ALERTS.pdf.
The
ABA
and FBI advisories encourage attorneys to be wary of accepting
clients who only communicate by email and to avoid wiring money
on
behalf
of
encourage
those
attorneys
clients;
to
to
delete
this
end,
emails
the
from
new
advisories
and
do
suspicious
clients. The advisories say nothing about deleting emails which
indicate that a third party is attempting to perpetrate fraud in
connection
with
advisories
which
Bile misstates
which
he
make
Ubom's
an
ongoing
stand
the
relies.
case,
for
such a
industry and
Read more
deletion
of
and
Court
proposition.
can
find
no
In conclusion,
law enforcement advisories
properly,
the
the
July
these
27,
advisories
2015
email
do
on
not
without
notifying opposing counsel reasonable.
D.
Defendants' Agents Exercised Ordinary Care
Meanwhile,
Defendants'
agents
neither
violated
the
principle that attorneys must notify opposing counsel when they
have actual
knowledge of attempted fraud nor industry and law
enforcement
advisories
transfers.
that
the
First,
July
regarding
unlike Ubom -
27,
2015
email
attorneys,
and
wire
who called Bile and thus
knew
from
the
fraud,
aoi.com
account
was
fraudulent - Oshinowo did not know or have any reason to suspect
that
the
July
29'
ubomlawgroup@yahoo.com was
2015
6: 40
fraudulent
33
p.m.
until he
email
from
spoke with Ubom
on July 31,
fraud.
2015,
Second,
at which point it was too late to prevent the
the
industry
relating to attorneys,
inapplicable
to
this
and
scams,
law
enforcement
and wire transfers are,
situation.
Sending
a
wire
advisories
as noted,
transfer
to
a
known defendant on behalf of a known client is not the same as
receiving a check from an unknown defendant and wiring funds to
an unknown client.
Nor did Defendants'
in funds transfers.
phone
call
foreign
banks,
8,
FBI,
11,
Bile states,
verification
country
is
ABA,
19,
agents act contrary to best practices
of
what
21).
As
any
is
and State
with
repeatedly,
wire
advised
[Bars]."
the
scam
variations on "[a]
transfer
and
especially to
recommend [ed]
by
a
the
(Pl.s Post-Hrg.
Resp.
3-4,
advisories
which
Bile
on
attempts to rely, these phone verification advisories are not in
the record, and thus this argument also fails for lack of proof.
Moreover,
Bile
again
misstates
the
content
of
such
advisories. The FBI did release an advisory on scams in which a
fraudster mimics the
wire
transfer.
Investigation
identity of a person and then requests a
Business
E-mail
(Jan.
Compromise,
Federal
Bureau
22,
https://www.ic3.gov/media/2015/150122.aspx. 22
22
of
2015)'
However,
that
Suggestions
that
businesses
should
employ
two-factor
authentication to ensure that only authorized persons initiate
wire transfers, e.g., Choice Escrow & Land Title, LLC v.
BancorpSouth
Bank,
754
F.3d
611
(8th
Cir.
2014),
are
34
advisory suggested corroborating requests to ensure validity and
screening emails
screening
for
for
proper
proper digital
digital
signatures.
signatures
In
would not
this
have
case,
helped
Oshinowo because the malicious third party had access to Ubom's
actual email account,
ubomlawgroup@yahoo.com.
Additionally,
the
wire transfer request was partially corroborated: unlike typical
business email compromise scams,
which request a wire transfer
for a payment which was previously wholly uncontemplated,
this
request redirected a pre-existing payment request, and that preexisting payment request had been discussed via phone as well as
email.
This is not to say that Oshinowo might not have exercised
greater care when he received the email directing the settlement
funds to an overseas bank account.
However,
Article 3 does not
require best practices: it requires ordinary care,
and there is
no proof that LeClairRyan did not exercise ordinary care.
At the heart of this
agent,
Ubom,
could
have
case is the simple fact
prevented
the
notifying opposing counsel on July 27,
knowledge of an attempted fraud,
loss
of
that Bile's
$63, 000. 00
by
2015 when he had actual
the known purpose of which was
to lay hands on the settlement funds. As technology evolves and
fraudulent schemes evolve with it,
the Court has no compunction
inapplicable
here,
because
the
LeClairRyan
employee
who
initiated the wire transfer, Lemmert, was an authorized person
who would have had legitimate access to both factors.
35
in
firmly
stating
a
rule
that:
where
an
attorney
has
actual
knowledge that a malicious third party is targeting one of his
cases
with
fraudulent
intent,
the
attorney must
either
alert
opposing counsel or must bear the losses to which his failure
substantially contributed.
The Court concludes that Defendants substantially performed
their
obligations
completed the
acted
with
under
wire
the
transfer
ordinary
Settlement
of
care.
$63, 000. 00.
Because
performed on or about July 29,
Agreement
2015,
they
so doing,
In
when
they
Defendants
substantially
Defendants are entitled to
compel enforcement of the Settlement Agreement.
(Cf. Pl.'s Post-
Hrg. Resp. 17-20).
Because Defendants substantially performed on or about July
29,
2015,
Defendants
could not
have
committed an anticipatory
breach when Oshinowo communicated to Ubom on July 31,
Defendants
would
not
pay
out
Defendants engage in the
first
Pl.' s
14-17,
Post-Hrg.
Mem.
another
(or any)
$63,000.00,
2015 that
nor
material breach.
24-28).
Because
did
(Cf.
Defendants
substantially performed, Bile cannot demand specific performance
which
would
compel
Defendants
performance.
36
to
repeat
their
substantial
CONCLUSION
For the
reasons
set
forth
above,
Defendants
substantially
performed their obligations under the Settlement Agreement on or
about
July
29,
2015,
and
Defendants
reciprocal performance from Bile.
FOR SETTLEMENT ENFORCEMENT
are
Therefore,
(Docket No.
51)
entitled
to
compel
Defendants'
MOTION
will be granted and
Plaintiff's MOTION TO ENFORCE SETTLEMENT AGREEMENT
54}
(Docket No.
will be denied. An order dismissing the case with prejudice
will be entered.
It is so ORDERED.
/s/
Robert E. Payne
Senior United States District Judge
Richmond, Virginia
Date: August -1::!f_, 2016
37
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